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Housing Code Enforcement Case Impacting Minorities

Many urban local governments in Oregon have adopted housing codes to regulate substandard housing. These local codes ensure that dwellings remain healthy and safe for habitation and authorize government planning or development managers to pursue enforcement remedies where nuisance conditions exist such as insufficient fire protection, lack of heating, unsanitary conditions or overcrowding. Enforcement activities include property inspections, mandatory abatement and improvements, and sometimes the evacuation or demolition of structures. Although often solely complaint driven and significantly hampered by budgetary constraints, these codes authorize local governments to pursue nuisance abatement programs as they deem appropriate.

The intensity under which local governments may force the abatement of housing code violations is the subject of a housing discrimination case, Magner v. Gallagher, for which the US Supreme Court recently granted certiorari. The Court’s decision will not only affect local government’s ability to plan and require safe and sanitary housing; it could also significantly restrict housing advocates’ efforts at encouraging the provision of affordable housing across the nation.

The Fair Housing Act (“FHA”) makes it unlawful “[t]o refuse to sell or rent …or otherwise make available or deny a dwelling to any person because of race, color, religion, sex, familial status, or national origin.” In addition to providing relief in cases where there is actual proof that the activity was driven by a discriminatory purpose or motive, the FHA has also been interpreted to allow for recovery in cases where a facially neutral practice or policy caused a disparate impact on a protected class. In Magner, a number of owners of rental properties persuaded the Eighth District Court of Appeals that the City of Saint Paul’s “aggressive enforcement” of its housing codes had a disparate impact on minorities because a disproportionate number of renters are African-American and requiring that landlords meet the housing code will increase their costs and decrease the number of units they will make available to rent to minority tenants. The two questions that the US Supreme Court will consider are whether disparate impact claims, those where there is no evidence of intent to discriminate, are recognized under the FHA, and if so, what test should govern this review.

This case raises the difficult question of how to balance the need for habitable and safe affordable housing opportunities and the regulations governing the same against the cost to owners for providing such opportunities. For example, should the fact that there is a shortage of low income housing opportunities in St. Paul, exacerbated by evidence that enforcement actions increase the costs for providing affordable housing and, in some cases, force sales eliminating low income housing opportunities, be sufficient to establish disparate impact alone? Or should the inquiry also include a balancing of the non-discriminatory policy objective sought through the action and an evaluation of whether another viable alternative means of achieving the objective is available?

Perhaps more importantly, the Supreme Court will decide in the first instance whether the FHA contains a basis for allowing a disparate impact analysis so that recovery may be permitted where there is no evidence of intent to discriminate. Rather than finding roots in the express language of the FHA, the disparate impact test appears to rely solely on the “purpose” of the FHA in protecting tenant (or potentially owners of affordable housing) from activities that have a “discriminatory effect.” Not surprisingly the City of St. Paul argues that disparate impact claims are not cognizable under the FHA, which gives the Supreme Court majority’s textualist tendencies, the chance to abolish the disparate impact claim under the FHA altogether. This result would substantially limit housing advocates’ ability to challenge local policies that disproportionately deny housing to minorities. Such a ruling may also allow landlords to use the FHA as a basis for not complying with generally applicable housing code regulations. Using cost of compliance to property owners as a basis for finding disparate impact is certainly abhorrent to affordable housing advocates as well to as the American Planning Association which may file amicus briefs arguing on the side of the landlords as well as tenants, making for strange bedfellows, but only in so far as necessary to keep the disparate impact test in place. As for identifying the appropriate test, the arguments of the property owners and housing advocates are likely to deviate substantially.

Briefs responding to the City’s appeal are due next month and a ruling by the Supreme Court is likely forthcoming sometime this summer. In the alternative, housing advocates are working with the US Department of Housing and Urban Development to adopt administrative rules expressly providing for a disparate impact test. It is unclear if such rules will be promulgated in advance of the Supreme Court’s ruling and what effect the Supreme Court’s decision may have on that rulemaking.

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We regularly update clients about changes in real estate law and on industry trends. This includes briefing clients on legislative proposals in the federal tax, housing and other legal areas affecting their businesses. Staying current enables you to anticipate and prevent legal problems as well as capitalize on new developments.
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